Japan’s 2023 Green Transformation (GX) Basic Policy set a national target to supply 10 million tons of green steel by 2030 and introduced measures such as green steel procurement and the promotion of international rule-setting based on Japan’s steel industry. While Japan’s Ministry of Economy, Trade and Industry (METI) defines green steel broadly as steel that emits “significantly less CO₂ during production than conventional steel,” there is currently no universally accepted threshold or definition. The government supports various production pathways under this term, including hydrogen-based reduction, carbon capture in blast furnaces with hydrogen injection, and electric arc furnaces powered by non-fossil electricity. The GX 2040 Vision (2025) outlines a long-term roadmap to mobilize 150 trillion yen in public–private investment and support decarbonization in sectors including steel. The GX Emissions Trading System (GX-ETS), set for operation in fiscal 2026, will introduce CO₂ caps and credit trading for large emitters including steelmakers. The government also continues to support voluntary industry action through the GX League, which promotes low-carbon procurement commitments and hosts discussions on green steel standards. Complementary regulations such as the revised Energy Conservation Act and Basic Hydrogen Strategy reinforce the shift toward non-fossil energy and low-carbon hydrogen in steel production, while demand-side incentives for green steel adoption are promoted through policies such as the Act on Promoting Green Procurement. Many of the rules and definitions underpinning Japan’s green steel policy were developed with extensive input from the steel industry, as seen in working groups convened to shape standards and procurement mechanisms. These policies reflect a broader strategy centered on investment incentives and industry-led transitions—an approach that prioritizes flexibility and collaboration with emitters, although with some ambiguity about the overall stringency and ambition of Japan’s decarbonization pathway for steel.
Japan’s decarbonization approach for the steel sector has been shaped by a series of interlinked policies, combining long-term strategy with evolving regulatory and market-based tools. In June 2021, the Ministry of Economy, Trade and Industry (METI) launched a new Green Growth Strategy Through Achieving Carbon Neutrality in 2050, which included the aim to capture the future green steel market, projected to reach up to 500 million tons annually (about 40 trillion yen) by 2050, through the development of technologies such as carbon-free electricity in electric arc furnaces and carbon-free hydrogen in blast furnaces. Green steel is broadly defined in this strategy as steel produced through methods such as hydrogen reduction and hydrogen injection to blast furnace + CCUS/carbon recycling.
In February 2023, the Cabinet adopted the Green Transformation (GX) Basic Policy, which includes a 2030 target to supply 10 million tons of green steel and cut greenhouse gas emissions from the steel sector by 30% from 2013 levels. The policy outlines measures such as revising public procurement standards to promote green steel, encouraging competitive electricity pricing, promoting Scope 3 emissions disclosures, and leading international rule-setting on definitions and measurement of green steel. Under Japan’s G7 Presidency, METI commissioned a report by the IEA on emissions measurement for a net-zero steel industry, published in April 2023.
In April 2023, amendments to the Energy Conservation Act introduced new requirements for large emitters such as steelmakers to submit plans for increasing their use of non-fossil electricity alongside medium- to long-term transition strategies. In June 2023, METI revised its Basic Hydrogen Strategy, identifying hydrogen use in ironmaking as a strategic focus area and stating that the government will evaluate the carbon intensity of hydrogen applications with the aim of accelerating industrial transition toward low-carbon hydrogen post-fiscal 2030.
While METI describes green steel as emitting “significantly less CO₂ than conventional steel,” a standardized definition has yet to be internationally established. Recognizing the availability of green steel products with a variety of definitions and thus a need to enhance clarity for consumers, METI launched the Study Group on Green Steel for GX in October 2024, with participation from representatives of industries across the steel supply chain. The group’s January 2025 findings focused on three key areas: 1) promoting recognition of “GX value” for green steel domestically and internationally by collaborating with the World Steel Association and other initiatives, developing product‑specific carbon footprint (CFP) rules, and exploring their use in government policies; (2) expanding the use of CFPs by customers through data development and disclosure and by examining how non‑fossil energy certificates can be applied to steel products; and (3) providing supply-side and demand-side support for the purchase and government procurement of “Green Steel for GX” and the utilization of steel scrap. Thus, the rules and definitions for green steel now promoted in Japan’s domestic and international policy were shaped through extensive industry input, with “Green Steel for GX” defined as products with significant emissions reductions and cost increases from company-specific mitigation efforts, based on mass balance and book-and-claim methodologies largely promoted by blast furnace steelmakers.
The GX League, launched by METI, is a voluntary framework with over 700 participating companies that have set near- and medium-term emissions targets and participated in a trial emissions trading system (ETS). In December 2024, METI launched the GX Leadership Declaration as an outcome of discussions in the GX League, to support market creation for products with high production costs but low market demand such as green steel, low-carbon hydrogen, and green chemicals. Participating companies publicly declare their intention to adopt such products, and are grouped by levels of commitment to increase predictability and transparency. Dedicated working groups within the GX League continue to expand this framework, contributing to METI discussions on GX product markets.
In February 2025, the Cabinet adopted the GX 2040 Vision, a long-term roadmap to mobilize 150 trillion yen in public–private investment and build on Japan’s GX Promotion Strategy. It identifies steel as one of several high-emissions sectors for which it targets support for industrial decarbonization. Alongside measures for R&D and incentives to support industrial decarbonization, the strategy aims to decarbonize the steel sector by promoting technologies including a shift from conventional blast furnaces to electric furnaces and hydrogen-based steelmaking processes, and fuel switching in private power generation facilities and boilers for industrial use. It also outlines public procurement measures and measures to encourage companies to procure and utilize green steel, among other GX products. The Cabinet also approved the 7th Strategic Energy Plan in February 2025, which outlines steel decarbonization through hydrogen reduction technologies, hydrogen injection in blast furnaces with CCS/CCUS, innovative electric furnaces, and the expanded use of green steel produced from decarbonized facilities.
Japan’s GX Emissions Trading System (GX-ETS), scheduled for full implementation in fiscal 2026, will impose CO₂ emissions caps on companies including steelmakers, and those companies will be able to trade emissions credits. The GX 2040 Vision states plans to adopt a free allocation mechanism in the GX-ETS to support decarbonization without undermining industrial competitiveness for sectors such as steel—emissions allowances will be allocated to companies free of charge, guided by sector-specific government benchmarks. In addition, the government has stated that allocations may be adjusted based on companies’ R&D investments.
The Act on Promoting Green Procurement, amended by the Cabinet in January 2025, also plays a key role in shaping green steel demand by allowing the government and public corporations to systematically promote the procurement of products classified as environmentally friendly goods. The criteria for iron and steel includes steel defined by the Japan Iron and Steel Federation (JISF) in its "Guidelines for Green Steel."
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